Hong Kong shares hit highest close in 2012, China up too

Mon Oct 22, 2012 5:18am EDT

* HSI +0.7 pct, H-shares +0.6 pct, CSI300 +0.4 pct

* HKEx at highest since May, trading volumes seen recovering

* China Mobile posts 1.3 rise in Q3 profit after-hours

* Greentown surges after Goldman Sachs names it conviction buy (Updates to close)

By Clement Tan and Vikram Subhedar

HONG KONG, Oct 22 (Reuters) - Hong Kong stocks reached their highest close in 2012 on Monday, rising on expectations of more capital inflows into the territory and growing hopes of a recovery in China's domestic markets.

Money flowing into Hong Kong forced the territory's monetary authority to intervene in the currency market on Saturday for the first time in three years after the Hong Kong dollar pushed against the top-end of its trading band.

The Hang Seng Index ended up 0.7 percent at 21,697.55. Until Monday, the year's highest close was 21,680.08, on Feb. 29.

The Hong Kong benchmark extended its run of gains to eight straight days, the longest such streak since June 2010. The China Enterprises Index of the top Chinese listings in Hong Kong rose 0.6 percent.

Earlier, the CSI 300, made up of the top Shanghai and Shenzhen listings, closed up 0.4 percent while the Shanghai Composite Index finished up 0.2 percent. Both indices reversed earlier losses to end higher, thanks to strength in large-cap banking and energy shares.

"For the Chinese economy as a whole, the worst is almost over," said Lewis Pan, chief investment officer of Pride Investments, adding that he expects more policy measures after the country's new leadership is finalized at next month's party congress.

In one sign of improving investor sentiment, shares of local bourse operator Hong Kong Exchanges & Clearing (HKEx), seen by some traders as a barometer of risk appetite, rose 3.5 percent to their highest since May 3.

HKEx shares have suffered this year as trading volumes have fallen and share offerings dried up. HKEx is now up 1.2 percent in 2012 year compared to the 17.7 percent rise for the Hang Seng.

"I think you can tell from HKEx today that (foreign) money remains quite positive on China. There's some profit-taking today, but volumes are quite small," said Jackson Wong, Tanrich Securities' vice-president for equity sales.

Bucking the overall positive trend shares of Chinese oil majors, PetroChina fell 1.3 percent in Hong Kong and 1.1 percent in Shanghai on weaker crude prices.

EARNINGS BACK IN FOCUS

China Mobile, the country's largest mobile operator, got the third quarter earnings season for Hong Kong blue chips started. After market hours, it reported a 1.3 percent rise in profit for the period.

Its shares closed up 1.1 percent.

China Mobile is currently trading at an 8 percent discount to its historic 12-month forwards earnings multiple ,and a 23 percent discount to its 12-month forward price-to-book value, according to Thomson Reuters StarMine.

"It seems to us that China Mobile is a utility stock now and the growth story is over," said Pride Investments' Wan, adding that his fund does not own the stock.

Chinese property developer Greentown China Holdings surged 7.5 percent after brokerage Goldman Sachs listed the stock in its list of Asia-Pacific "conviction buys."

Goldman Sachs said the company had consistently improved its monthly sales performance over the third quarter, suggesting that Greentown had overcome challenges it faced due to a stretched balance sheet.

($1 = 6.2538 Chinese yuan) (Editing by Richard Borsuk)

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